The Price System: Multiple Choice Questions

The Price System: Multiple Choice Questions

Profit:

Is the difference between total revenue and total cost

Is the difference between variable costs and fixed costs

Is always a number greater than zero

Must be reported to Wall Streat quarterly

In an effort to earn a profit, businesses are likely to:

Produce the least amount of pollution possible

Restrict competition when possible

Provide the safest working conditions possible

Encourage competitors to enter the market

Market structure is determined by the:

Annual revenue, costs and profit for an industry

Number and relative size of the firms in an industry

Amount of compensations given to the CEOs

Price changed for the good or services provided

The perfectly competitive market structure includes all of the following except:

Many firms

Identical products

Large advertising budgets

Low-entry barriers

Perfect competition is a situation in which:

Every year, owners are likely to earn economic profits

Every year, owners are likely to earn economic losses

There are many firms and several buyers or sellers have market power

There are many firms and no buyer or seller has market power

If the equilibrium price in a perfectly competitive market for walnuts is $4.99 per pound, than an individual firm in this market can:

Not sell additional walnuts unless the firm lowers its price

Not sell additional walnuts at any price because the market is at equilibrium

Sell an additional pound of walnuts at $4.99

Only sell more by increasing its advertising budget

Which of the following is true about the demand curve confronting a competitive firm?

Horizontal, as is market demand

Horizontal, while the market demand is down-ward sloping

Down-ward sloping, while market demand is flat

Down-ward sloping, as in market demand

For the perfectly competitive firm, the marginal revenue is always:

Increasing

Constant

Equal to average total cost

Decreasing

A catfish farmer will shut down production when:

He is losing money

Price falls below AVC

Total revenue falls below total costs

The best he can do is breakeven

A firm experiencing economic losses will still continue to produce output in the short run as long as:

Revenue costs are greater than the total fixed cost

MR = MC

Price is above average variable cost

Price is above average fixed cost

For a competitive market in the long run:

Economic losses induce firms to shut down

Economic profits induce firms to enter until profits are normal

Accounting profit is zero

Economic profit is positive

Examples of barrier to entry include:

Price taking

Patents

Standardized products

Economic profits

Which of the following is a barrier to entry:

Economic Profit

Control of essential factors of production

Economies of scale

Perfect information

Which of the following is characteristic of a perfectly competitive market

Long-run economic profit

High barriers to entry

Identical Products

A small number of firms

If price is above the long run competitive equilibrium level:

Firms will enter the market

Firms will shut down

Firms will incur losses

Market supply will shift to the left

Which of the following is a consequence of competition:

An unrelenting squeeze on prices and profit

Positive economic profit in the long run

Elimination of the most efficient firms

Price-gouging behavior

Refer to Fgure 8.7 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point:

A

B

C

D

Refer to Fgure 8.7 for a perfectly competitive firm. If this firm produces the level of output corresponding to point B in the short ...